A guide and notice on virtual currency issued by the US Treasury Department Anti-Money Laundering Unit (AML) on June 30, 2021 clarified regulatory expectations, angered some cryptocurrency players, and signaled a potential new global standard for tackling financial crime.

The statement added that the guidance “does not establish any new regulatory expectations” and “consolidates the current regulations, guidance and administrative decisions of FinCEN”. FinCEN has a broad international reach for any company doing substantial business with American people, and therefore international companies should be careful whether they source cryptocurrency from American exchanges or interact with American consumers.

Whenever FinCEN issues an advisory, compliance officers at banks and virtual currency companies will spend a significant amount of time over the next few days reviewing the advisory in the context of their businesses and customers. Concerns include another round of bank account closures, not because clients engage in illegal activity, but because compliance officers and managers fail to understand the technology behind cryptocurrencies as a solution. of ease rather than investing time and effort to learn more about the space. .

Although owners of blockchain-based investments most often hold cryptocurrencies, blockchain technology is expanding into non-monetary areas. In either case, however, there are risks mainly because 1) estate planners and family members are misinformed about the presence and nature of blockchain assets, 2) clients do not realize that wills and trusts must have specific language to authorize personal representatives and trustees to manage those assets after incapacity or death, and 3) the regulatory environment, taxation, reporting, enforcement if laws on the intestate succession and other issues still need to be resolved.

Traditional planning entities also find it difficult to own cryptocurrency, especially if there is a fiduciary duty to the beneficiaries to prudently invest the assets. Without specific language, a trust or other entity will not be able to hold cryptocurrency, but if that language is written too broadly, the trustee may be exempt from damages due to willful negligence. Additionally, cryptocurrency is treated as property rather than currency by tax authorities for tax purposes, meaning that fair market value is set by conversion into U.S. dollars for the IRS, at “a rate reasonable exchange rate ”and transactions. involving cryptocurrencies are subject to capital gains tax regulations. This can result in the cryptocurrency being taxed at one denomination in one country and at another denomination in another country.

On top of all this, care should be taken to preserve the benefits of cryptocurrency. Cryptocurrency is highly secure, but this security is at risk if the private key or seed phrase is carelessly saved. With the right private key or the right seed phrase, anyone can access cryptocurrency, so planning and procedures should include how to secure this information. Like cash, cryptocurrency is not traceable. There is no electronic or paper trail linking the parties to each other in a transaction involving cryptocurrency. To preserve this confidentiality, you must provide that the other documents of the transaction do not reveal these identities, or at least that this information is privileged. Shorter transfer time and lower costs. Unlike hard currencies, transferring cryptocurrency only takes a few moments and the costs of transferring are low or nonexistent.

So what to do? First, let your real estate planner and family know about all blockchain-based assets, especially cryptocurrency, that you own. If the value of these assets exceeds $ 10,000 and the assets are in the custody of a trustee or offshore institution make sure that you also report this investment annually and that the custodian who holds the assets has the ability to invest the time and effort required to comply with the myriad changes as they occur.

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